Share Name Share Symbol Market Type Share ISIN Share Description
Aukett Swanke Group Plc LSE:AUK London Ordinary Share GB0000617950 ORD 1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.0% 1.95 1.80 2.10 1.95 1.95 1.95 0.00 00:00:00
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Support Services 14.4 -2.5 -1.4 - 3

Aukett Swanke Group PLC Interim Results

28/06/2019 7:00am

UK Regulatory (RNS & others)


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6 Months : From Jun 2019 to Dec 2019

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RNS Number : 7240D

Aukett Swanke Group PLC

28 June 2019

Aukett Swanke Group Plc

Interim results

For the six months ended 31 March 2019

Aukett Swanke Group Plc (the "Group"), the international practice of architects, interior designers and engineers, is pleased to announce its interim results for the six month period ended 31 March 2019.

Highlights

Revenues marginally down at GBP7.30m (2018: GBP7.41m)

Loss before tax significantly reduced to GBP371k (2018: GBP1.22m loss)

Cash (net of overdraft) of GBP628k (2018: GBP317k) with net funds of GBP199k (2018: net debt of GBP311k)

UK operation recovered strongly in H1 to achieve breakeven at a loss of GBP15k (2018: loss GBP879k)

Middle East recovery delayed due to quieter market; losses widened to GBP438k (2018: Loss GBP380k)

Continental Europe improved on associate and JV results to GBP60k profit (2018: GBP18k)

Commenting on the interim results, CEO Nicholas Thompson said:

Every section of the construction industry continues to struggle with the slowdown arising from the uncertainty presented by the current political and economic climate around the world; but we are pleased to show an improvement in our figures as a result of the vigorous actions taken by our management teams in the reorganisation and restructuring of the business and have every expectation of a return to profitability in the near future.

Enquiries

Aukett Swanke Group Plc - 020 7843 3000

Nicholas Thompson, Chief Executive Officer

Tony Barkwith, Group Finance Director

finnCap - 020 7220 0500

Corporate Finance: Julian Blunt; Giles Rolls / Corporate Broking: Alice Lane

Investor/Media enquiries - 07979 604687

Chris Steele

Interim statement

Overview

The results for the six months to 31 March 2019 show a small fall in revenue compared to the first half of last year at GBP7.30m (2018: GBP7.41m) but evidence of half on half improvement when compared with the second half of last year. With cost reductions coming through, following management actions in the previous first half period, the loss before tax was substantially reduced to GBP371k (2018: GBP1.22m) which was mainly in the Middle East operation.

The most dramatic improvement in performance was in the UK where revenues grew by 16% and costs fell by 9% such that the operation recovered to broadly a breakeven position. This is a significant turnaround from the GBP879k loss last year.

On the reverse side, revenues in the Middle East fell by 9% in a quieter market. Costs remain well controlled and were reduced, however losses increased from GBP380k to GBP438k, representing broadly all of the overall Group loss for the half year.

Both Russia and Turkey continued to experience falls in revenues and with Russia unlikely to recover in the foreseeable future, we continue to seek an alternative local ownership format. The German associate and joint venture were both profitable such that Continental Europe as whole was in profit.

The Group's cash position remains steady with a positive cash position of GBP628k net of a small overdraft which compares favourably with the 2018 position where net cash was GBP317k and is only slightly lower than the year end position of GBP710k. We continued to pay down the amortising loan advanced to fund the acquisition of Shankland Cox Limited. After taking account of that, net funds were GBP199k (2018: net debt of GBP311k) showing an improvement since the year end where net funds stood at GBP157k. As each period elapses our cash position continues to strengthen and is underpinned by improved debtor collections, particularly in the UK. The 24 month rent free period in respect of our London headquarters does not currently provide any real benefit until after May 2019 as it is largely offset by rent deposits until then.

The Group adopted the new accounting standards IFRS 9 and IFRS 15 with effect from 1 October 2018. Whilst the adoption of IFRS 15 resulted in no material restatement of revenue recognition, the impact of IFRS 9 was a restatement of the carrying value of trade receivables and contract assets, reducing them by GBP221k as at 1 October 2018. This arose from the IFRS 9 requirement to make expected loss provisions on current balances based on a measure of historical losses incurred. This is detailed further in note 9 to the Interim Report.

United Kingdom

Encouragingly the UK operation returned a breakeven result at the half way stage which is a considerable improvement on the loss of GBP879k this time last year and reflects a positive outcome in both better revenue generation in the period and the impact of the cost reduction decisions in staffing and property that were made in the previous year.

Revenue rose by GBP512k (16%) to GBP3.73m (2018: 3.22m) largely driven by a growing order book in the Veretec executive architecture business. Costs, by contrast, fell by GBP352k (9%) as a result of reductions in most overhead categories including property.

Veretec contributed 60% of the first six months revenue which included ongoing projects at Dovehouse for Multiplex, an apartment block for Lodha in Carey Street, LBS Hackney Road, EDS Avantgarde, and BAFTA's head office. This element of the UK business is benefitting from its strong market position and continuation of construction work in the London conurbation. For a fourth year running Veretec was shortlisted for the AJ100 Executive Architect of the Year and has previously won this Award on two occasions in its four year history.

Aukett Swanke Limited, which provides a full architectural service, was bolstered by renewed instructions on our educational scheme in Birmingham for Birmingham City University at Eastside Locks; planning on the Hub in Cambridge; six new instructions for our hybrid building initiative or 'beds on sheds' schemes in the London geography; planning on the Asticus building in Palmer Street; preliminary work on a new hotel resort in Southern England and completion of our work at Ten Trinity Square, the award winning Four Seasons hotel in the City. We completed our interior design work on our Chinese client's projects in the West End and Beijing and, received further instructions for Deutsche Bank in Reading.

Towards the end of the period the design team regained some of its market share with a number of project wins crystallising shortly after the half year.

Middle East - United Arab Emirates

A delay on our major retail project in the region coupled with a series of project cancellations and deferrals plus reduced levels of overall market activity led to a 9% fall in revenue (or 15%, stripping out sub-consultant costs recharged to clients). Whilst headcount reductions were made (the full benefit of which will be evident in the second half) with costs falling GBP408k (12%) to GBP3.11m (2018: GBP3.52m) the current year loss widened to GBP438k (2018: GBP380k) and this figure is the main determinant of the Group's overall loss at the Interim stage.

We continued our major refurbishment project at the Atlantis, The Palm, in supporting the construction of the Leader Sports Mall in Sports City, providing site services to the Al Ain Museum and have been involved in a number of Pavilions for Dubai Expo 2020.

In March we won an international competition to design six buildings in Abu Dhabi for ALDAR. The location of the buildings is on The Grove development on Saadiyat Island home to the Guggenheim Museum, Louvre and Sheikh Zayed Museum. In addition the Samanea Market was finally instructed as detailed in our release earlier this week and should contribute significantly to the second half performance. This substantial concept design commission along with continuing commissions is expected to lift our H2 revenues (and more particularly our revenues less sub consultants) to levels that will bring the region into profit for the second half.

Continental Europe

The performance of our businesses in Continental Europe has been mixed with both Russia and Turkey making small losses. Revenue for these two operations fell again to GBP234k (2018: GBP526k). Once we include the contributions from the associate and two joint ventures the overall result is a profit of GBP64k (2018: GBP18k).

Wholly owned operations

Turkey began the year with several projects beginning on site including those for VM Ware in Bulgaria and Credit Suisse, Nike and Sanofi in Istanbul. Russia has continued to operate at a minimal cost level and, whilst making a small loss, is completing a suite of small Moscow based residential apartments, revisions to the Vernadskogo luxury apartment complex and some larger regional residential and hotel project concept designs in various locations including Tumen and Omsk.

Associate and joint venture operations

Both the Berlin and Frankfurt operations in Germany continue to enjoy buoyant local markets. Major project completions this year include the Mercedes Platz Arena, a major leisure and arts venue in Berlin, several fit-outs and refurbishment works in the iconic Messe Turm, the fit-out of Zurich Insurance's 17 storey HQ and the Living Lyon housing project in Frankfurt.

The Prague office completed Dimension Data's HQ project (shortlisted for an award) in Prague, and has begun work on two significant projects including the refurbishment of the OC Repy Triyaka Shopping Centre and the recently won 12,000 sqm fit out for WPP in their HQ building in Prague.

Group costs

Group costs at GBP18k (2018: GBP17k) were consistent compared to the prior period.

Prospects

Providing there is no delay to the recently won projects in the UAE and that there is a better conversion rate on design-led commissions in the UK the Board expects the second half to show a considerable profit improvement over the first half and continues to expect a full year profit.

Nicholas Thompson

Chief Executive Officer

27 June 2019

Consolidated income statement

For the six months ended 31 March 2019

 
                                     Note      Unaudited      Unaudited         Audited 
                                              six months     six months         year to 
                                             to 31 March    to 31 March    30 September 
                                                    2019           2018            2018 
                                                 GBP'000        GBP'000         GBP'000 
 Revenue                              4            7,301          7,412          14,380 
 
 Sub consultant costs                              (725)          (729)         (1,286) 
----------------------------------  -----  -------------  -------------  -------------- 
 Revenue less sub consultant 
  costs                                            6,576          6,683          13,094 
 
 Personnel related costs                         (5,644)        (5,995)        (11,915) 
 Property related costs                            (812)          (882)         (2,029) 
 Other operating expenses                          (725)        (1,098)         (2,066) 
 Other operating income               5              154             83             287 
----------------------------------  -----  -------------  -------------  -------------- 
 Operating loss                                    (451)        (1,209)         (2,629) 
 
 Finance costs                                      (14)           (18)            (36) 
----------------------------------  -----  -------------  -------------  -------------- 
 Loss after finance costs                          (465)        (1,227)         (2,665) 
 
 Share of results of associate 
  and joint ventures                                  94              3             121 
----------------------------------  -----  -------------  -------------  -------------- 
 Loss before tax                      4            (371)        (1,224)         (2,544) 
 
 Tax credit                                           17            134             171 
----------------------------------  -----  -------------  -------------  -------------- 
 
 Loss for the period                               (354)        (1,090)         (2,373) 
----------------------------------  -----  -------------  -------------  -------------- 
 
 Loss attributable to: 
    Owners of Aukett Swanke Group 
     Plc                                           (315)        (1,068)         (2,345) 
    Non-controlling interests                       (39)           (22)            (28) 
----------------------------------  -----  -------------  -------------  -------------- 
 Loss for the period                               (354)        (1,090)         (2,373) 
----------------------------------  -----  -------------  -------------  -------------- 
 
 Basic and diluted earnings 
  per share for loss attributable 
  to the ordinary equity holders 
  of the Company: 
   From continuing operations                    (0.19)p        (0.65)p         (1.42)p 
----------------------------------  -----  -------------  -------------  -------------- 
 Total loss per share                 6          (0.19)p        (0.65)p         (1.42)p 
----------------------------------  -----  -------------  -------------  -------------- 
 
 
 
 

Consolidated statement of comprehensive income

For the six months ended 31 March 2019

 
                                         Unaudited      Unaudited         Audited 
                                        six months     six months         year to 
                                       to 31 March    to 31 March    30 September 
                                              2019           2018            2018 
                                           GBP'000        GBP'000         GBP'000 
 Loss for the period                         (354)        (1,090)         (2,373) 
 
 Other comprehensive income: 
 Currency translation differences             (16)          (102)            (31) 
-----------------------------------  ------------- 
 Other comprehensive income for 
  the period                                  (16)          (102)            (31) 
 
 Total comprehensive loss for 
  the period                                 (370)        (1,192)         (2,404) 
-----------------------------------  -------------  -------------  -------------- 
 
 Total comprehensive loss is 
  attributable to: 
    Owners of Aukett Swanke Group 
     Plc                                     (343)        (1,163)         (2,370) 
    Non-controlling interests                 (27)           (29)            (34) 
-----------------------------------  -------------  -------------  -------------- 
 Total comprehensive loss for 
  the period                                 (370)        (1,192)         (2,404) 
-----------------------------------  -------------  -------------  -------------- 
 

Consolidated statement of financial position

At 31 March 2019

 
                                   Note   Unaudited   Unaudited     Restated 
                                              at 31       at 31        at 30 
                                              March       March    September 
                                               2019        2018         2018 
                                            GBP'000     GBP'000      GBP'000 
 Non current assets 
 Goodwill                                     2,374       2,344        2,372 
 Other intangible assets                        773         834          810 
 Property, plant and equipment                   91         108          114 
 Investment in associate and 
  joint ventures                                793         699          793 
 Deferred tax                                   391         343          377 
--------------------------------  -----  ----------  ----------  ----------- 
 Total non current assets                     4,422       4,328        4,466 
 
 Current assets 
 Trade and other receivables                  4,049       7,141        4,554 
 Contract assets                                980           -        1,220 
 Cash at bank and in hand           8           705       1,030          710 
--------------------------------  -----  ----------  ----------  ----------- 
 Total current assets                         5,734       8,171        6,484 
 
 Total assets                                10,156      12,499       10,950 
 
 Current liabilities 
 Trade and other payables                   (4,209)     (4,479)      (4,386) 
 Contract liabilities                         (748)           -        (886) 
 Current tax                                      -           -          (1) 
 Borrowings                         8         (322)       (941)        (246) 
 Provisions                                       -       (190)            - 
 Total current liabilities                  (5,279)     (5,610)      (5,519) 
 
 Non current liabilities 
 Borrowings                         8         (184)       (400)        (307) 
 Deferred tax                                  (56)        (65)         (61) 
 Provisions                                   (871)       (855)        (927) 
 Total non current liabilities              (1,111)     (1,320)      (1,295) 
 
 Total liabilities                          (6,390)     (6,930)      (6,814) 
 
 Net assets                                   3,766       5,569        4,136 
--------------------------------  -----  ----------  ----------  ----------- 
 
 
 Capital and reserves 
 Share capital                                1,652       1,652        1,652 
 Merger reserve                               1,176       1,176        1,176 
 Foreign currency translation 
  reserve                                      (52)        (87)         (24) 
 Retained earnings                            (624)       1,182        (309) 
 Other distributable reserve                  1,494       1,494        1,494 
--------------------------------  -----  ----------  ----------  ----------- 
 Total equity attributable 
  to 
  equity holders of the Company               3,646       5,417        3,989 
--------------------------------  -----  ----------  ----------  ----------- 
 
 Non-controlling interests                      120         152          147 
--------------------------------  -----  ---------- 
 Total equity                                 3,766       5,569        4,136 
--------------------------------  -----  ----------  ----------  ----------- 
 

Consolidated statement of cash flows

For the six months ended 31 March 2019

 
                                     Note      Unaudited      Unaudited         Audited 
                                              six months     six months         year to 
                                             to 31 March    to 31 March    30 September 
                                                    2019           2018            2018 
                                                 GBP'000        GBP'000         GBP'000 
 Cash flows from operating 
  activities 
 Cash expended by operations          7              (4)          (576)            (11) 
 Interest paid                                      (14)           (18)            (36) 
 Income taxes paid                                   (1)              -               - 
----------------------------------  -----  -------------  -------------  -------------- 
 Net cash outflow from operating 
  activities                                        (19)          (594)            (47) 
 
 Cash flows from investing 
  activities 
 Purchase of property, plant 
  and equipment                                      (5)              -            (79) 
 Sale of property, plant and 
  equipment                                            -             25              26 
 Dividends received                                   66             66              99 
----------------------------------  -----  -------------  -------------  -------------- 
 Net cash received in investing 
  activities                                          61             91              46 
 
 Net cash inflow / (outflow) 
  before financing activities                         42          (503)             (1) 
 
 Cash flows from financing 
  activities 
 Repayment of bank loans                       (123)              (117)           (236) 
 Net cash outflow from financing 
  activities                                       (123)          (117)           (236) 
 
 Net change in cash and cash 
  equivalents                                       (81)          (620)           (237) 
 
 Cash and cash equivalents 
  at start of period                                 710            960             960 
 Currency translation differences               (1)                (23)            (13) 
----------------------------------  -----  -------------  -------------  -------------- 
 Cash and cash equivalents 
  at end of period                    8              628            317             710 
----------------------------------  -----  -------------  -------------  -------------- 
 
 
 Cash and cash equivalents are comprised 
  of: 
 Cash at bank and in hand                    705   1,030   710 
 Secured bank overdrafts                    (77)   (713)     - 
 Cash and cash equivalents at end 
  of year                                    628     317   710 
-----------------------------------------  -----  ------  ---- 
 

Consolidated statement of changes in equity

For the six months ended 31 March 2019

 
                     Share        Foreign    Retained           Other     Merger      Total             Non      Total 
                   capital       currency    earnings   distributable    reserve                controlling     equity 
                              translation                     reserve                             interests 
                                  reserve 
                   GBP'000        GBP'000     GBP'000         GBP'000    GBP'000    GBP'000         GBP'000    GBP'000 
---------------  ---------  -------------  ----------  --------------  ---------  ---------  --------------  --------- 
 Balance at 30 
  September 
  2018 
  as originally 
  presented          1,652           (17)        (95)           1,494      1,176      4,210             147      4,357 
 
 Changes in 
  accounting 
  policy (note 
  9)                     -            (7)       (214)               -          -      (221)               -      (221) 
 
 Restated total 
  equity at 1 
  October 
  2018               1,652           (24)       (309)           1,494      1,176      3,989             147      4,136 
 
 Loss for the 
  period                 -              -       (315)               -          -      (315)            (39)      (354) 
 Other 
  comprehensive 
  income                 -           (28)           -               -          -       (28)              12       (16) 
---------------  ---------  -------------  ----------  --------------  ---------  ---------  --------------  --------- 
 Total 
  comprehensive 
  loss                   -           (28)     (315)                 -          -      (343)            (27)      (370) 
 
 At 31 March 
  2019               1,652           (52)       (624)           1,494      1,176      3,646             120      3,766 
---------------  ---------  -------------  ----------  --------------  ---------  ---------  --------------  --------- 
 

For the six months ended 31 March 2018

 
                     Share        Foreign    Retained           Other     Merger      Total             Non      Total 
                   capital       currency    earnings   distributable    reserve                controlling     equity 
                              translation                     reserve                             interests 
                                  reserve 
                   GBP'000        GBP'000     GBP'000         GBP'000    GBP'000    GBP'000         GBP'000    GBP'000 
---------------  ---------  -------------  ----------  --------------  ---------  ---------  --------------  --------- 
 At 1 October 
  2017               1,652              8       2,250           1,494      1,176      6,580             181      6,761 
 
 Loss for the 
  period                 -              -     (1,068)               -          -    (1,068)            (22)    (1,090) 
 Other 
  comprehensive 
  income                 -           (95)           -               -          -       (95)             (7)      (102) 
---------------  ---------  -------------  ----------  --------------  ---------  ---------  --------------  --------- 
 Total 
  comprehensive 
  loss                   -           (95)     (1,068)               -          -    (1,163)            (29)    (1,192) 
 
 At 31 March 
  2018               1,652           (87)       1,182           1,494      1,176      5,417             152      5,569 
---------------  ---------  -------------  ----------  --------------  ---------  ---------  --------------  --------- 
 

For the year ended 30 September 2018 (as originally presented)

 
                     Share        Foreign    Retained           Other     Merger      Total             Non      Total 
                   capital       currency    earnings   distributable    reserve                controlling     equity 
                              translation                     reserve                             interests 
                                  reserve 
                   GBP'000        GBP'000     GBP'000         GBP'000    GBP'000    GBP'000         GBP'000    GBP'000 
---------------  ---------  -------------  ----------  --------------  ---------  ---------  --------------  --------- 
 At 1 October 
  2017               1,652              8       2,250           1,494      1,176      6,580             181      6,761 
 
 Loss for the 
  year                   -              -     (2,345)               -          -    (2,345)            (28)    (2,373) 
 Other 
  comprehensive 
  loss                   -           (25)           -               -          -       (25)             (6)       (31) 
---------------  ---------  -------------  ----------  --------------  ---------  ---------  --------------  --------- 
 Total 
  comprehensive 
  loss                   -           (25)     (2,345)               -          -    (2,370)            (34)    (2,404) 
 
 At 30 
  September 
  2018               1,652           (17)        (95)           1,494      1,176      4,210             147      4,357 
---------------  ---------  -------------  ----------  --------------  ---------  ---------  --------------  --------- 
 

Notes to the Interim Report

   1          Basis of preparation 

The financial information presented in this Interim Report has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards ('IFRS') as adopted by the EU that are expected to be applicable to the financial statements for the year ending 30 September 2019 and on the basis of the accounting policies expected to be used in those financial statements.

   2          New accounting standards applied 

A number of new or amended standards became applicable for the current reporting period and the Group had to change its accounting policies to correctly reflect the requirements of the following standards:

   -     IFRS 9 Financial Instruments, and 
   -     IFRS 15 Revenue from Contracts with Customers. 

The impact of the adoption of these standards and the new accounting policies are disclosed in note 9 below.

   3          New accounting standards not yet applied 

IFRS 16 Leases

The standard will require almost all leases to be on the balance sheet of lessees and introduces a single income statement model which effectively brings the majority of leases onto the balance sheet.

This standard is effective for accounting periods beginning on or after 1 January 2019 and the Group expects to adopt this standard for its accounting period beginning on 1 October 2019. The impact of applying this standard is still being investigated.

   4          Operating segments 

The Group comprises a single business segment and three separately reportable geographical segments (together with a Group costs segment). Geographical segments are based on the location of the operation undertaking each project. Turkey and Russia are included within Continental Europe together with Germany and the Czech Republic.

 
 Segment revenue           Unaudited      Unaudited         Audited 
                          six months     six months         year to 
                         to 31 March    to 31 March    30 September 
                                2019           2018            2018 
                             GBP'000        GBP'000         GBP'000 
 United Kingdom                3,731          3,219           6,744 
 Middle East                   3,336          3,667           6,819 
 Continental Europe              234            526             817 
---------------------  ------------- 
 Total                         7,301          7,412          14,380 
---------------------  -------------  -------------  -------------- 
 
 
 
 Segment result before tax        Unaudited      Unaudited         Audited 
                                 six months     six months         year to 
                                to 31 March    to 31 March    30 September 
                                       2019           2018            2018 
                                    GBP'000        GBP'000         GBP'000 
 
 United Kingdom                        (15)          (879)         (1,505) 
 Middle East                          (438)          (380)         (1,209) 
 Continental Europe                      64             18             131 
 Group costs                             18             17              39 
----------------------------  -------------  -------------  -------------- 
 Total loss                           (371)        (1,224)         (2,544) 
----------------------------  -------------  -------------  -------------- 
 
 
   5          Other operating income 
 
                                         Unaudited      Unaudited         Audited 
                                        six months     six months         year to 
                                       to 31 March    to 31 March    30 September 
                                              2019           2018            2018 
                                           GBP'000        GBP'000         GBP'000 
 Property rental income                         86             11              28 
 Management charges to associate 
  and joint ventures                            55             61             115 
 Licence fee income                              2              2               - 
 Other sundry income                            11              9              17 
 Fair value gain on the reduction 
  of deferred consideration                      -              -             127 
 Gain recognised on acquisition 
  settlement                                     -              -               - 
----------------------------------   -------------  -------------  -------------- 
 Total other operating income                  154             83             287 
-----------------------------------  -------------  -------------  -------------- 
 

The increase in property rental income from GBP11,000 in the six months to March 2018 to GBP86,000 in the six months to March 2019 is due to an increase in property sublet rental income to efficiently match the Group's UK property requirement.

   6          Earnings per share 

The calculations of basic and diluted earnings per share are based on the following data:

 
 Earnings                   Unaudited      Unaudited         Audited 
                           six months     six months         year to 
                          to 31 March    to 31 March    30 September 
                                 2019           2018            2018 
                              GBP'000        GBP'000         GBP'000 
 Loss for the period            (315)        (1,068)         (2,345) 
----------------------  -------------  -------------  -------------- 
 
 
 Number of shares                         Unaudited      Unaudited         Audited 
                                         six months     six months         year to 
                                        to 31 March    to 31 March    30 September 
                                               2019           2018            2018 
                                               '000           '000            '000 
 Weighted average number of shares          165,214        165,214         165,214 
 Effect of dilutive options                       -              -               - 
-----------------------------------   -------------  -------------  -------------- 
 Diluted weighted average number 
  of shares                                 165,214        165,214         165,214 
------------------------------------  -------------  -------------  -------------- 
 
   7          Reconciliation of profit before tax to net cash from operations 
 
                                        Unaudited      Unaudited         Audited 
                                       six months     six months         year to 
                                      to 31 March    to 31 March    30 September 
                                             2019           2018            2018 
                                          GBP'000        GBP'000         GBP'000 
 Loss before tax - continuing 
  operations                                (371)        (1,224)         (2,544) 
 Finance costs                                 14             18              36 
 Share of results of associate 
  and joint ventures                         (94)            (3)           (121) 
 Intangible amortisation                       40             41              80 
 Depreciation                                  30             86             161 
 Profit on disposal of property, 
  plant and equipment                         (1)           (14)            (14) 
 Decrease in trade and other 
  receivables                                 711            457           1,952 
 (Decrease) / increase in trade 
  and other payables                        (282)             40             586 
 Change in provisions                        (58)             56           (117) 
 Unrealised foreign exchange 
  differences                                   7           (33)            (30) 
----------------------------------  -------------  -------------  -------------- 
 Net cash expended by operations              (4)          (576)            (11) 
----------------------------------  -------------  -------------  -------------- 
 
   8          Analysis of net funds 
 
                                  Unaudited      Unaudited         Audited 
                                at 31 March    at 31 March              at 
                                       2019           2018    30 September 
                                    GBP'000        GBP'000            2018 
                                                                   GBP'000 
 Cash at bank and in hand               705          1,030             710 
 Secured bank overdrafts               (77)          (713)               - 
----------------------------  -------------  -------------  -------------- 
 Cash and cash equivalents              628            317             710 
 
 Secured bank loan                    (429)          (628)           (553) 
----------------------------  ------------- 
 Net funds/(debt)                       199          (311)             157 
----------------------------  -------------  -------------  -------------- 
 
   9              Changes in accounting policies 

This note explains the impact of the adoption of IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers on the Group's financial statements and also discloses the new accounting policies that have been applied from 1 October 2018, where they are different to those applied in prior periods.

Impact on the financial Statements

The following table shows the adjustments recognised for each individual line item. Line items that were not affected by the changes have not been included. As a result, the sub-totals and totals disclosed cannot be recalculated from the numbers provided.

 
                                   30 Sep              Unaudited                Unaudited 
                                  2018 as                 30 Sep                1 October 
                               originally                   2018                     2018 
                                presented    IFRS 15    restated      IFRS 9     restated 
                                  GBP'000    GBP'000     GBP'000     GBP'000      GBP'000 
 
 Current assets 
 Trade (and other) 
  receivables                       5,995    (1,261)       4,734       (180)        4,554 
 Contract assets                        -      1,261       1,261        (41)        1,220 
 Total current assets               6,705          -       6,705       (221)     6,484 
---------------------------  ------------  ---------  ----------  ----------  ----------- 
 Total assets                      11,171          -      11,171       (221)     10,950 
---------------------------  ------------  ---------  ----------  ----------  ----------- 
 Current liabilities 
 Trade and other 
  payables                        (5,272)        886     (4,386)           -      (4,386) 
 Contract liabilities                   -      (886)       (886)           -        (886) 
---------------------------  ------------  ---------  ----------  ----------  ----------- 
 Net assets                         4,357          -       4,357       (221)        4,136 
---------------------------  ------------  ---------  ----------  ----------  ----------- 
 Foreign currency 
  translation reserve                (17)          -        (17)         (7)         (24) 
 Retained Earnings                   (95)          -        (95)       (214)        (309) 
 Total equity attributable 
  to 
  equity holders of 
  the Company                       4,210          -       4,210       (221)        3,989 
---------------------------  ------------  ---------  ----------  ----------  ----------- 
 Total equity                       4,357          -       4,357       (221)        4,136 
---------------------------  ------------  ---------  ----------  ----------  ----------- 
 

IRFS 9 Financial Instruments - Impact of adoption

IFRS 9 replaces the provisions of IAS 39 that relate to the recognition, classification and measurement of financial assets and financial liabilities, derecognition of financial instruments, impairment of financial assets and hedge accounting.

The adoption of IFRS 9 Financial Instruments from 1 October 2018 resulted in changes in accounting policies and adjustments to the amounts recognised in the financial statements. The new accounting policies are set out in below. In accordance with the transitional provisions in IFRS 9 7.2.15) and (7.2.26), comparative figures have not been restated.

 
 
                                           GBP'000 
 Closing retained earnings 30 
  September 2018 - IAS 39/IAS 
  18                                          (95) 
 
   Increase in provision for trade 
   receivables and contract assets           (214) 
--------------------------------------  ---------- 
 
   Adjustment to retained earnings 
   from adoption of IFRS 9 on 1 
   October 2018                              (214) 
 
 Opening retained earnings 1 
  October 2018 - IFRS 9 (before 
  restatements for IFRS 15)                  (309) 
--------------------------------------  ---------- 
 

Impairment of financial assets

The Group has identified the following types of financial assets that are subject to IFRS 9's new expected credit loss model:

   -     Trade receivables; 
   -     Contract assets relating to unbilled work in progress and project retentions. 
   -     Other financial assets at amortised cost. 

Trade receivables and contract assets

The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a

lifetime expected loss allowance for all trade receivables and contract assets.

To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk characteristics and the days past due. The contract assets relate to unbilled work in progress and project retentions, and have substantially the same risk characteristics as the trade receivables for the same types of contracts. The Group has therefore concluded that the expected loss rates for trade receivables are a reasonable approximation of the loss rates for the contract assets.

The Group engages with clients who are creditworthy, liquid developers. Management identified that the loss allowances should be calculated and applied separately based on geographic segments of the Group, and more specifically to each country in which the Group has operations. Whilst the specific terms each contract the Group engages in may be different, certain common characteristics can be applied.

Provisions on bad and doubtful debts in the UK, Turkey and Russia have been immaterial in the historical period reviewed in order to establish the expected loss rate at 1 October 2018. In the UK and Russia the Group generally builds up advances for contract work recognised as a credit to the balance sheet which reduces the impact of potential bad debts. Amounts due for contract work not yet billed are generally not material. No loss allowance provision has been made for trade receivables and contracts assets owed to Group entities operating in these countries.

Amounts due for contract work in the Middle East segment are material, with contracts in the Middle East often billed in arrears. Sizeable write offs in prior years have informed the overall rate calculated for the provisioning matrix.

The loss allowance for the Middle East operating segment as at 1 October 2018 was determined as follows for both trade receivables and contract assets:

 
                                              More than   More than   More than 
                                  1-30 days     30 days     60 days     90 days 
       1 October 2018   Current    past due    past due    past due    past due    Total 
 
   Expected loss 
   rate (%)                  4%          5%          8%         13%         17% 
                       --------  ----------  ----------  ----------  ----------  ------- 
 
   Gross carrying 
   amount (GBP'000)       1,590         463      115            180         566    2,914 
                       --------  ----------  ----------  ----------  ----------  ------- 
 
   Loss allowance 
   (GBP'000) through 
   CSOFP                     71          24           9          23          94      221 
                       --------  ----------  ----------  ----------  ----------  ------- 
 
   Loss allowance 
   (GBP'000) through 
   retained earnings         69          23           9          22          91      214 
                       --------  ----------  ----------  ----------  ----------  ------- 
 

The loss allowance was initially calculated in United Arab Emirate Dirhams (AED) being the functional currency of the Group entities in the Middle East operating segment. On conversion to GBP in the Group consolidation a foreign exchange difference of GBP7k arises which is taken through the foreign currency translation reserve.

The loss allowances for trade receivables and contract assets as at 30 September 2018 reconcile to the opening loss allowances on 1 October 2018 as follows:

 
                                                   Contract    Trade receivables 
                                                     assets              GBP'000 
                                                    GBP'000 
 
   At 30 September 2018 - calculated under 
   IAS 39                                                 -                  915 
 
  Amounts restated through opening retained 
  earnings                                               40                  174 
 
   Amounts restated through opening foreign 
   currency 
   translation reserve                                    1                    6 
-----------------------------------------------   ---------  ------------------- 
 
   Opening total loss allowance as at 1 
   October 2018 - calculated under IFRS 
   9                                                     41                1,095 
-----------------------------------------------   ---------  ------------------- 
 
 
 

The loss allowances decreased by GBP54k to GBP126k for trade receivables and by GBP7k to GBP34k for contract assets during the six months to 31 March 2019.

 
 
   At 31 March 2019 - calculated under 
   IAS 39                                        -   1,105 
 
   Loss allowance provision                     34     126 
 
   Amounts restated through opening Foreign 
   Currency 
   translation reserve                           -       - 
---------------------------------------------  ---  ------ 
 
   Total loss allowance as at 31 March 
   2019 - calculated under IFRS 9               41   1,231 
---------------------------------------------  ---  ------ 
 

A further allowance for impairment of trade receivables and contract assets is established on a case by case when there are indicators suggesting that the specific debtor balance in question has been impaired. Known significant financial difficulties of the client and lengthy delinquency in receipt of payments are considered indicators that a trade receivable may be impaired. Where a trade receivable or contract asset is considered impaired the carrying amount is reduced using an allowance and the amount of the loss is recognised in the income statement within other operating expenses.

Other financial assets at amortised cost

Other financial assets at amortised cost include rent deposits, letters of guarantee secured by matching cash on deposit and other receivables. No credit losses have been applied to these balances as the Group has concluded that this risk is not material.

IFRS 15 Revenue from Contracts with Customers - Impact of adoption

IFRS 15 is the new revenue standard which replaces existing standards and guidance including IAS 18 Revenue and IAS 11 Construction Contracts. Applying IFRS 15, an entity recognises revenue to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

To recognise revenue under IFRS 15, an entity applies the following five steps:

   --      Step 1: Identify the contract(s) with a customer; 

-- Step 2: Identify the performance obligations in the contract. Performance obligations are promises in a contract to transfer to a customer goods or services that are distinct;

-- Step 3: Determine the transaction price. The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. If the consideration promised in a contract includes a variable amount, an entity must estimate the amount of consideration to which it expects to be entitled in exchange for transferring the promised goods or services to a customer;

-- Step 4: Allocate the transaction price to each performance obligation on the basis of the relative stand-alone selling prices of each distinct good or service promised in the contract; and

-- Step 5: Recognise revenue when a performance obligation is satisfied by transferring a promised good or service to a customer. A performance obligation may be satisfied at a point in time or over time. For a performance obligation satisfied over time, an entity would select an appropriate measure of progress to determine how much revenue should be recognised as the performance obligation is satisfied.

The Group has applied the new standard using the cumulative transition method, with the cumulative effect of applying the standard recorded as an adjustment to retained earnings on the date of initial application, being the 1 October 2018. Our decision to adopt this method rather than retrospectively restate prior periods depends on a number of factors including time, cost and available resources compared to the benefits to the users of the financial statements.

Management has performed a review of the impact of adopting IFRS 15 to the Group's financial statements. The review demonstrated that the measurement of revenues for the majority of contracts still follows an "over time" pattern as previously recognised under IAS 18. Some contracts have been noted as being recognised on a "point in time" basis.

However management believes that the financial impact of adjustments to revenue recognition following the adoption of IFRS 15 cumulatively as at 30 September 2018 are immaterial, and has therefore not made an adjustment to the opening reserves for the period commencing 1 October 2018.

Presentation of contract assets and contract liabilities

Aukett Swanke Group Plc has voluntarily changed the presentation of certain amounts in the balance sheet to reflect the terminology of IFRS 15 and IFRS 9:

Contract assets recognised in relation to amounts due on contract work and project retentions were previously presented as part of trade and other receivables.

Contract liabilities in relation advances form contract work were previously included in trade and other payables.

   10         Status of Interim Report 

The Interim Report covers the six months ended 31 March 2019 and was approved by the Board of Directors on 27 June 2019. The Interim Report is unaudited.

The interim condensed set of consolidated financial statements in the Interim Report are not statutory accounts as defined by Section 434 of the Companies Act 2006.

Comparative figures for the year ended 30 September 2018 have been extracted from the statutory accounts of the Group for that period.

The statutory accounts for the year ended 30 September 2018 have been reported on by the Group's auditors and delivered to the Registrar of Companies. The audit report thereon was unqualified, did not include references to matters to which the auditors drew attention by way of emphasis without qualifying the report, and did not contain a statement under Section 498 of the Companies Act 2006.

Where comparative figures have subsequently been restated following the adoption of new accounting policies as explained in notes 2 and 9, adjustments have not been audited by the Group's auditors.

   11         Further information 

Copies of the Interim Report will be dispatched by post to direct holders of 100,000 or more shares in due course. An electronic version will be available on the Group's website (www.aukettswanke.com).

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

IR LLFIRRIIDFIA

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June 28, 2019 02:00 ET (06:00 GMT)

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